What makes direct plans cheaper?
Aug 02, 05:08

When you invest in a mutual-fund scheme through a distributor, you get registered in the regular plan of the scheme. The total expense ratio (TER) of regular plan has two major components - the fund management fee and the distributor commissions. On the other hand, the investor can bypass distributors in a direct plan. As investors only bear the fund management fee, direct plans are cheaper than regular plan. However, investing directly is advisable only for investors who have some understanding of financial markets and can deal with market volatility. A distributor or advisor handholds investors during difficult market conditions so that they stay invested to achieve their goals.

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